Michigan got $173M to transform rural health. Where is it going?

Michigan is doling out the first in a pool of federal funds meant to innovate and strengthen rural healthcare systems. But key stakeholders are saying the dollars are not flowing to the groups that need it the most, and some lawmakers are noting a lapse in reporting where the money is going as budget deadlines near.

State health officials took to the Michigan Capitol Tuesday to discuss the allocation of first-year funds through the Rural Health Transformation Program, a five-year, $50 billion nationwide initiative approved through President Donald Trump’s One Big Beautiful Bill Act last year.

With more rounds of federal awards expected in the coming years, Michigan is set to use its initial funding from the Centers for Medicare & Medicaid Services — about $173 million — across four initiatives:

1. Improving collaboration in rural settings to treat chronic conditions

2. Preparing the state’s healthcare workforce

3. Increasing access to home-based services and

4. Upgrading outdated technology.

Where is the money going?

A state website for the public with the most current ’subrecipients ’ shows a total of about $102 million in grants awarded for 126 organizations as of Aug. 31. Officials with the Michigan Department of Health and Human Services told Bridge Michigan the page is in the process of being updated.

Figures cited by MDHHS to state lawmakers at a recent meeting, however, exceed what has been publicly posted.

On Tuesday, officials reported that $124.6 million rural health direct grants have been allocated and approved by the Centers for Medicare & Medicaid Services for 236 subrecipients across the state. The remaining $48.4 million remain as grant-funded opportunities to be allocated at a later date.

“We anticipate spending the vast amount of this award on local partners in Michigan’s rural healthcare system,” Beth Nagel, a senior deputy director for MDHHS leading the program’s rollout, told the Michigan House Appropriations Subcommittee on Medicaid and Behavioral Health on Sept. 22.

The Michigan Department of Labor and Economic Opportunity is the biggest beneficiary overall, according to available documents, with about $26 million split between its Office of Rural Prosperity and high speed internet office.

About $3.6 million is going to the Michigan Department of Education for workforce development initiatives, and $2 million for the Michigan Veterans Affairs Agency for behavioral health efforts.

The Michigan Center for Rural Health, a government-supported nonprofit housed at Michigan State University, is receiving $7.2 million to support several initiatives.

Michigan’s 12 federally recognized tribes and the nonprofit American Indian Health and Family Services of Southeastern Michigan received nearly $8.7 million in funding. The state has a 5% carveout for tribal governments, with each entity receiving about $666,000.

Local health departments are receiving about $5.4 million total. District Health Department #10, which serves a large area of the upper Lower Peninsula, leads the local department funding with about $1.7 million. State universities are being awarded $6.3 million and local school districts $374,000.

More than 30 nonprofit organizations are receiving funding, with awards ranging as low as $35,000 and into the millions. The Michigan Health and Hospital Association is the largest nonprofit beneficiary with $8.6 million.

Rural Area Agencies on Aging, regional nonprofits that run services for older adults, are receiving about $3.4 million in all. Fewer than 20 Federally Qualified Health Centers, a safety net for patients who may not be able to pay, are getting a total of $1.9 million.

Growing concerns

Since inception, Michigan’s plan to distribute funds from the Rural Health Transformation Program has been scrutinized by rural healthcare leaders. They say the plan is insufficient to address the loss of critical Medicaid funding for patients in rural Michigan and to keep facilities financially stable.

Rural hospital leaders in Michigan say the federal program is unable to augment day-to-day operations to support frontline medical care, and is instead flowing to programs on the periphery of where the system is experiencing the most strain.

“Very few of those dollars are actually going to hospitals,” Dr. Ross Ramsey, president and CEO of Scheurer Health, said of the grants.

Scheurer Health is receiving $83,333 through the transformation program to fund community health workers. Its main hospital is sandwiched between a bank of grain elevators and a manufacturer of animal feed in Pigeon, near the tip of Michigan’s Thumb.

Other organizations will be involved in boosting the health of rural Michigan residents, Ramsey said, but they shouldn’t do so at the cost of hospitals, which are often the “heartbeat” of health in rural Michigan.

“It appears they have other priorities than where the cuts are happening,” he said of the state.

Rural lawmakers also criticized the state’s application as lacking after Michigan was awarded less funding than its peers. For example, Ohio received $202 million through the Rural Health Transformation Program, and $206 million went to Indiana.

The federal government awarded half of its state funding based on a point system that scored 23 varying factors, including total square miles, participation in medical licensure compacts and adherence to so-called “MAHA polices.”

Several Republicans have criticized the state’s inclusion of counties with large urban metros like Wayne and Oakland as eligible for the rural funds.

Michigan’s most rural communities are expected to get the bulk of the funding. $71.5 million is being distributed towards programs in the northern Lower Peninsula, according to MDHHS, and $38.5 million in the Upper Peninsula.

Reporting lag

Nagel acknowledged that figures published through the state’s procurement platform don’t reflect the total amount of money the state has allocated. State Rep. Julie Rogers, D-Kalamazoo, said databases indicate only about $1.9 million have been “encumbered,” referring to the program’s committed budget spending.

The state’s reporting discrepancy represents a “transparency issue,” according to state Rep. Greg VanWoerkom, R-Norton Shores, who chairs the House subcommittee.

“They can send the public notices that they’ve committed this,” VanWoerkom told Bridge. “But in the end, we got to see it in the system.”

The Centers for Medicare & Medicaid Services requires the state to obligate its Rural Health Transformation funding by Oct. 30 but does not require the funds to be fully spent until September 2027. The $173 million sum is set to be spent across two budget periods.

Because the State of Michigan’s fiscal year runs through Sept. 30, VanWoerkom said MDHHS will likely have to authorize about $171 million past the current fiscal year for future use.

He said the state’s reporting is crucial, as clear performance metrics are needed to ensure the program’s continued funding. “We want to see actual results in health outcomes for these areas.”

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Bridge senior health reporter Robin Erb contributed to this report.

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This story was originally published by Bridge Michigan and distributed through a partnership with The Associated Press.